One kind of government regulation would be to prohibit building tools that would, for instance, track your location. I can see how that would harmful government intrusion.
Another kind of government regulation would be, for instance, to prohibit companies from intentionally lying when describing to the public what kind of personal information their devices record with the intent to conceal it. That kind of regulation would then allow customers to make the informed choices you speak of.
Companies can already get in trouble for "intentionally lying" it's called fraud. Of course, that's assuming a user reads the TOS and actually knows what they've agreed to accept.
Another kind of government regulation would be, for instance, to prohibit companies from intentionally lying when describing to the public what kind of personal information their devices record with the intent to conceal it. That kind of regulation would then allow customers to make the informed choices you speak of.